Update
China:
CEWC: most of the statement is reiteration of previous stimulus packages. No new initiatives. No new money - in fact financing of the already announced interventions to stabilise the real estate market was omitted altogether.. Three shifts in language: 1. stimulating consumption is promoted to a primary task; 2. reigning in excessive competition was added. 3. Urban village renovation was brought in as a way of stimulating demand. None of this was in the Politburo statement issued last week.
The "stimulating consumption" bit seems to be about more programs to swap old products for new. The bit about limiting competition is likely a signal that the government will interfere with EV and solar markets. Renovating urban villages is a slow motion policy that takes years to implement and is no game changer..
The CEWC statement speaks to the view that the PC has a tough time defining the problems and a worse time fixing them. Risk mitigation is still the name of the game - not surgery to remove dead assets and bad loans; introduce price discovery to clear the real estate overhang and stimulate household demand by addressing the causes of excessive household saving rates. On top of that root and branch fiscal reform is needed to replace local government dependence on real estate for revenues. So we wander on deep in the bamboo forest with an occasional fleeting glimpse of the sky.
Market disappointment is probably less scientific and more based on not getting lots of new money and new measures. That was never going to come from the CEWC anyway.
we have to wait until March NPC meeting to get the targets on growth, the deficit and the financing of all this largesse.
S. Korea.
President Yoon refuses to go - having agreed to step down quietly and only exercise ceremonial duties until he does.. Now he's back on TV babbling threat justifications for his declaration of martial law in a national addresses... So it's back to impeachment to get him out. And any impeachment case will take 50-80 days. It gets funnier! The Supreme court lacks a quorum of judges to try the case. Two more need to be appointed, The President appoints the judges, Oh Dear Oh Dear.
I mean if S. Korea were Luxembourg business would be as usual. But S. Korea isn't. This is rather devastating blow for S Koreans' self-esteem and to international perception of Korea.
S. Korea carved its democracy out of the granite of its totalitarian past and people were justifiably proud of it. Internationally, South Korea’s cultivated its image as a rock-solid democracy and a “ global pivotal state. ” Now the presidency - not just the individual but the institution- is revealed to be unfit for purpose. Not to mention that we have now got one looney in Seoul facing another one in Pyongyang with both of them in charge of mutually hostile countries with massive armies. I am sure the US is not very happy given this is a front line state in the Grayzone Conflict with 28,500 US soldiers defending it.
This looks like a crisis that will drag on. Eventually it will be resolved. I hope Pyongyang tries nothing funny before then. There will probably be a more left leaning S. Korean government. But until then the famous Korean discount for assets will hold sway. I wouldn't bet against it.
France
President Macron has nominated Francois Bayrou as the next French Prime minister. Bayrou is a centrist, Maire of Pau and head of the small MODem (Mouvement.Democratique) Party - an earthy man with strong ties to local farming in his region (Pyrenees- Atlantiques) where he lives on the traditional family farm. He is a practicing liberal minded catholic. He was once a teacher of history (and has the highest French teaching qualification) and has written books on subjects as varied Henri IV of France and the causes of the Great Financial Crisis. He is strong on human rights and a fervent pro European. He once described the European Union as "the most beautiful construct in the world". Bayrou has been an MEP, a French minister of education three times and a minister of justice once. In 2017 Bayrou was investigated as part of a fraud case about fictitious jobs created in the European Parliament. He resigned as a minister in the Macron government of the day. He was subsequently acquitted.
Shifting gear from the Euro Suave Barnier to the Academic but Earthy Bayrou does not change chalk from cheese. Either Bayrou will get a silly budget through or his government will fall like Barnier's. Either way fiscal reform in France is dead.
The strategy of the extreme left and Le Pen's Rallye National is to prolong political paralysis in France until Macron resigns or legislative elections can be held in June. In short their interest is to make make things worse while not being seen to be responsible for doing so.
The likelihood is the next president and government of France will be populist and economically irrational. That is where the EU sovereign debt issue becomes a target for bond vigilantes,
I am biding my time but expect 10 yr French Sovereign Bonds (OATS) to sell at spreads of 120 BP to bunds in 2025. compared to 78 BP today.